COVID-19 and your business
RFID tracking has been long coming as the inevitable future of textiles management. However, it never did, and it’s now at least 10 years overdue. Reasons given to explain this failure are cost, lack of accuracy and the absence of tangible benefits.
At LossLess Group, we have systematically worked on fixing each of these concerns. As regards cost, our system basically pays for itself from the savings it generates. Accuracy we achieve through a patented aggregation algorithm built into the system.
Our value propositions generate multiple benefits, not only measured in operational and financial terms.
Our services also address health and safety concerns, and contribute to environmental sustainability.
Connecting textiles turns them into assets with a residual value. This attribute opens up lease, a transaction option not available to date. Lease marries the economics of owning assets with the cash flow benefits of renting.
Traceability provides information about the price of textiles, items in circulation, number of washes, and losses. This functionality sheds light on the composition of the all-inclusive pay-per-wash tariff, generally used in the industry.
Often, hotels and hospitals choose a rental service because they find it difficult to control the lifecycle of their textiles. This choice is made despite a lack of understanding the real economics of that service.
From a financial perspective, visibility gained from traceability begs the question if rental of assets that are used on a daily basis should still be the preferred option.
This extension of transaction models is a natural consequence of the inevitable evolution of technology. As such, it should not be perceived as offensive, but as call for change. Connected textiles is a new industry that opens up a plethora of opportunities.
Everybody has a role to play, and an opportunity to benefit from these opportunities. Contact us if you want to know more.
The prerequisite for any RFID-enabled linen tracking system is that assets are equipped with an UHF RFID tag. There are many tag suppliers, using different combinations of components, but the basic construction and composition is roughly the same.
At the core of a tag is a lentil, an enclosure made of epoxy resin, that contains the UHF RFID chip and a primary antenna, which is used for Near Field Communication (NFC). This is a way for objects to communicate over a short distance, for instance when you pay for groceries using the chip on your credit card. The encapsulation of the chip is done to protect it from exposure to harsh laundry environments.
The next component is a secondary antenna, often a wire or metallic thread, sewn into the carrier in a specific shape. This antenna enables communication over greater distances. Finally, there’s a carrier, mostly a textile material composed of polyester, or a combination of polyester and cotton. The durability of this carrier determines the lifetime of the tag.
Besides the quality of a UHF RFID tag, there is also the cost to consider. Prices have decreased from around one Euro in 2005 to under 30 cents per tag. This makes it more attractive to virtualize textile assets on a larger scale.
However, what is often forgotten is the additional cost of attaching the tag to the textile item in order to make it ‘connected’, i.e. able to communicate with other connected objects through the Internet of Things. The preferred time for tag integration is during the production process, rather than retrofitting existing linen. The cost of manual attachment can be up to 30 cents, an added expense that should be eliminated, or at least reduced to a minimum.
At LossLess Group, together with our partners, we have developed UHF RFID tags on a roll that, when used on a labeling machine, enable automatic integration during the production process at no additional cost. This has been successfully tested at Standard Textile, one of the large manufacturers of hospitality and healthcare linen.
Hotels, or if we want to use a more confusing term: the lodging industry, use 3 key performance indicators to measure their performance: ADR, RevPAR and Occupancy rate. However, unlike other holy trinities in business, this is really a duality as RevPAR is a product of the other two: RevPAR = ADR x Occupancy rate.
Let’s explain each of these metrics. ADR stands for Average Daily Rate, the price for an occupied room on a given day. Occupancy indicates the percentage of available rooms that are occupied on that day. RevPAR, which stand for Revenue Per Available Room, is calculated by multiplying ADR and Occupancy in the period measured.
Occupancy rate can be influenced, but not controlled by the hotel operator, i.e. they cannot force customers to come to their hotel. They can try to persuade them by implementing dynamic pricing strategies that adapt room rates to current or expected demand.
As a point of reference, during the economic depression between 2008 and 2012, occupancy rates barely moved, but ADR decreased by nearly 25%. There were travelers, but there was no money. A world impacted by COVID, and uncertainty of the state of economy that lies ahead, present an entirely different scenario. Perhaps for the first time ever, there are neither travelers nor money, leaving the hospitality industry gasping for a brand-new way of managing their revenue.
Since this is a health crisis, at LossLess Group we believe that health measures will bring back customers, and we have a solution to assist you realize that goal. Contact us to find out.
Whilst asset leasing is a widely used financial construction, to date, it has never been applied to industrial textiles. In order for textile assets to be qualified as an entity that is fit for lease, it first needs to be transformed into a ‘true’ asset.
Historically, banks have shown no interest in offering financing solutions for textiles as these were considered a commodity with little or no residual value. This market gravitates around NFR (Non-Financial Risk) opportunities, and focuses heavily on assets that maintain high residual values, like technology and motor vehicles.
However, our control technology transforms a textile article into an assets with a demonstrable residual value at the end of its lifecycle. By doing so, we have created options to access an area of the finance market in which Asset Finance Companies (AFC) operate. This is a niche within the financial industry centred on a very specific product: asset and credit rights financing.
Effective January 2019, lease accounting is governed by IFRS 16, a standard that replaced IAS 17. For who’s interested: a little bit of history. In 2003, the International Accounting Standards Board (IASB) issued International Accounting Standard 17 (IAS 17), governing the treatment of leases. IAS 17 allowed considerable discretion in determining whether a lease was an ‘operating lease’, which could be held off the balance sheet, or a ‘finance lease’, which could not.
IAS 17 used a dual model classification approach. Finance leases were capitalized on the statement of financial position as an asset and liability, and reported on the profit and loss statement as an interest and depreciation expense. However, IAS 17 allowed companies to report operating leases in the footnotes of financial disclosures, which the IASB considered an accounting loophole.
Keeping operating leases off the balance sheet was believed to obscure the true nature of a company’s liabilities from potential investors. In an effort to increase transparency, IASB in 2016 announced the new accounting standard IFRS 16, which introduced significant changes to the treatment of leases, aimed at balance sheet transparency.
What is important for any business that incurs a variable cost for laundry related activities, is that a fixed lease cost is accounted below EBITDA. This is an important metric for any business as it is often used as the basis of performance and valuation.